National living wage not leading to job cuts

Employers have responded to the national living wage (NLW) by raising prices rather than cutting jobs, according to research by the Resolution Foundation (RF).

The new NLW was introduced from 1 April 2016, setting a wage of £7.20 an hour for workers aged 25 and over.

The majority of the 500 surveyed employers have not been seriously affected by the NLW since it came into force in April. Around 35% reported a wage bill increase with only 6% describing it having a large effect on their business.

35% of employers responded by raising prices or lowering profits.

The impact of the new wage found that prices in sectors dependent on minimum wage employees including hotels, takeways and domestic services had risen faster than higher paying sectors.

In responses impacting employees, 14% of employers chose to use less labour by offering fewer hours or redundancies.

While the rise of employment rates slowed in recent months, the impacts among those most likely to earn the NLW, such as women, part-timers and workers aged 25-34 and 65+, look similar to other workers, meaning the higher wage floor does not look like it is a primary factor in the slowdown.